James Clark Distilling Co. v. Mayor of Cumberland

McSherry, C. J., delivered the opinion of the Court. This suit was brought by the city of Cumberland against the James Clark Distilling- Company, a body corporate, to recover the amount of municipal taxes due by the shareholders of the company to the municipality on the shares of stock held by such of the shareholders as are residents of the city. There are several questions involved and they arise, some on demurrers by the defendant to four of the counts of the declaration ; others, on demurrers by the plaintiff to some of the pleas, and the remaining ones on exceptions to the admissibility of evidence and on rulings made on the prayers presented for instructions to the jury. These questions may be classified as follows : First, whether the municipality has, under its charter, authority to increase an assessment once made, unless there is a general new assessment oí all property within the city.

Secondly, whether a notice of such increase given to the corporation is a valid notice to the.shareholders within the requirement which declares that no assessment and the increase of no assessment previously made, shall be lawful unless the party charged is afforded an opportunity to be heard. Thirdly, whether the assessment was an assessment against the company or against the shareholders. Fourthly, whether the assessment was legal inasmuch as the greater part of the value of the stock was represented by distilled spirits which the Act of i8c)2, ch. yoy, requires to be valued as personal property and prohibits from being included in the assessment of the capital stock. Fifthly, whether the third prayer of the plaintiff should have been granted because at variance with the eleventh count of the declaration. ⁴⁷¹ The facts which give rise to and the statutory provisions which concern these several questions are, in brief outline, as follows : The James Clark Distilling Company is a body "corporate having a capical stock of one thousand shares, each of the par value of one hundred dollars.

In the year eighteen hundred and ninety-eight the stock was valued for the purposes of taxation by the State Tax Commissioner under secs. ij2 and 14.1 of Art. 81 of the Code, and "the value placed upon each share was twenty dollars. Under sec. 141 as amended by the Act of 1896, ch. 120, it is made the duty of the State Tax Commissioner to furnish to the County Commissioners of each county in which the shareholders of a corporation reside, a statement of the valuation put by him on the stock, and unless that valuation is changed, on appeal from his decision, by the Comptroller of the State Treasury and the Treasurer, the State, county and municipal taxes are levied thereon; but if the valuation made by the Tax Commissioner is changed on appeal, then the taxes are levied upon the valuation made by the Comptroller and the Treasurer. By sec. 1, Art. 81 of the Code, as re-enacted by the Act of 1896, ch. 120, it is provided that, “All State and county taxes and all municipal taxes shall be levied upon the assessments made in conformity with the provisions of this Article, and in conformity with all laws relating to revenue and taxes and not embraced in this Article.” In sec, 141 as amended by the Act of 1896, it is declared that “all county or municipal taxes assessed upon said respective taxable value of such respective shares of stock * * * shall be collected,” &c. The meaning of these sections as applied to the taxes in question is obvious.

In terms they distinctly declare that municipal taxes shall be levied upon assessments made in pursuance of the provisions of Art. 81 of the Code, There is no method of making assessments of shares of stock for the purposes of taxation of any kind, other than the mode above pointed out as prescribed by secs. IJ2 and 141 ; and it consequently follows that the valuation of such shares so made by the Tax Commissioner, or on appeal from him by the Comptroller and ⁴⁷² Treasurer, is the only valuation upon which municipal taxes can be levied. This being so no municipality in the State can place upon shares of stock which the Tax Commissioner is required to assess, any valuation different from that which has been fixed by that officer or by the Comptroller and Treasurer on appeal from him. There can, therefore, be no such thing as an independent valuation of such shares of stock by a municipality.

The assessment when made by the Tax Commissioner, or by the Comptroller and Treasurer, is made for the municipal, no less than for the State and county taxation; This being so it becomes the simple duty of the County Commissioners and the several municipalities to place upon the assessment books the valuations thus made, and to charge each shareholder at that valuation with the number of shares owned by him. Section 141, as frequently interpreted by this Court, requires that the shareholders shall be assessed with the shares so valued, though the company is burdened with the duty to pay the tax, which when paid it is permitted to charge to the account of the shareholder for whom it is paid. Hull v. South Dev. Co., 89 Md. 9 ; U. S. Elec.

Co. v. State, 79 Md. 70 ; Am. Coal Co. v. Allegany Co., 59 Md. 197 . For several years the assessment of the appellant company’s stock stood at the sum of twenty thousand dollars, and the city taxes were regularly paid thereon by the company ; but in nineteen hundred the State Tax Commissioner increased the valuation to ninety thousand dollars. He made a return of that valuation to the County Commissioners of Allegany County and the municipal authorities procured from the office of the County Commissioners a copy of that valuation and placed it on the city books.

The assessment as it originally stood and as it now stands on the tax books of the city is in the following form : ⁴⁷³ After the increased valuation had been made and had been entered on the city books a notice was delivered to the president of the company in these words : Cumberland, Md., July 28th, 1900. ‘' Mr. The Jas. Clark Distilling Co. Baltimore Street. “You are hereby notified that under and by virtue of sec“tion 59, of the city charter of Cumberland, we have assessed “your property, liable to taxation in said city, as follows : The assessed valuation of the capital stock according to the State Tax Commissioner’s report has been increased to $90,000. If you desire to appeal from this assessment, you must appear before the Committee on Appealsand the time and place are then named. No attention was paid to the notice and the assessment at ninety thousand dollars remained unchanged in the city books, and the municipal levy of ninety cents on the one hundred dollars was made in July.

The company had in the meantime appealed from the valuation fixed by the Tax Commissioner, and the assessment of ninety thousand dollars was reduced by the Comptroller and Treasurer to seventy-five thousand dollars, and that reduction was duly certified to the County Commissioners. Demand was made upon the company by the city for the amount of the tax on the whole capital stock at a valuation of ninety thousand dollars ; the company refused to pay and this suit was brought. Nine hundred and ninety-seven shares of the whole one thousand are held by two persons both of whom reside in Cumberland. The trial of the case resulted in a verdict and judgment in favor of the city for the tax on nine hundred and ninety-seven shares of the capital stock at the valuation of ninety dollars per share; and from that judgment this appeal was taken.

The first of the five questions heretofore mentioned as being presented by the record is raised by the defendant’s demurrer to the eighth count of the declaration, by the plaintiff’s demurrer to the fourth Jíca and by the defendant’s eighth prayer. We do not find any errors in the rulings just indicated, The power of the city under its ordinances and the local law to increase an assessment previously made is not involved and ⁴⁷⁴ therefore need not be considered ; and it is not involved, because, as has already been observed, the valuation of shares of capital stock is made, not by the municipality, but by the Tax Commissioner. As the municipal tax must be levied on the assessment made by the Tax Commissioner, or upon that fixed by the Comptroller and Treasurer on appeal, the city is confined to that valuation, and its powers with respect to making assessments are not called into activity at all. The question as to whether it has power to increase an assessment can only arise when an assessment which it has authority to make and has made has been increased by it; but such a question cannot arise when the power and the duty to make and to increase an assessment reside, as they do in this instance, in the State Tax Commissioner and have been exercised and performed by him.

The provisions of the city charter do not bear upon this branch of the inquiry and need not be alluded to; and they do not bear upon the inquiry because the assessment could not be made under them, but was made by the Tax Commissioner under sec, 141, Art. 81, of the Code of Public General Laws. The second question is one raised by the defendant’s demurrer to the ninth and tenth counts of the narr., bythe plaintiff \s demurrer to the third plea, and by the defendant’s third, fourth, fifth and sixth prayers; and it has relation to the failure of the city to give notice to the shareholders of the increase in the assessment. The rulings on those demurrers and on the prayers just enumerated were correct for two reasons. First, because a notice to each shareholder is not necessary ; and, secondly, because a notice, if given to each shareholder, would have been useless and nugatory as it could have accomplished nothing.

A notice to each shareholder is unnecessary because the corporation represents the shareholders. The officers of the corporation are required by the Code to make an annual return to the State Tax Commissioner, and upon the information disclosed by that return the valuation of the capital stock is placed each year. If the valuation is not satisfactory an appeal may be taken by the corporation for ⁴⁷⁵ the shareholders. An opportunity is thus afforded for the shareholders to be heard through the corporation, and that gratifies all the requirements of law.

If each and every shareholder in the great number of companies throughout the State had a right to insist upon a notice before an assessment of his shares could be made, and if each were given a separate right of appeal, it would be simply impossible to fix annually a valuation on shares of capital. The policy of the law is to treat the corporation not merely as tax collector after the tax has been levied, but to deal with it as the representative of the shareholders in respect to the assessment of the shares; and when notice has been given to the corporation and it has the right to be heard on appeal, notice is thereby given to the shareholders and they are accorded a hearing. This is so in every instance where the assessment is made by the State Tax Commissioner, because the